VISHESH SAHARA, MUMBAI V. ITO WD 12(2)(3), MUMBAI

ITA 6855/MUM/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4210 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 23-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV GUBGOTRA
• Keywords: Business income; Rule of consistency
• Section: 143(3); 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL , AM ./ I.T.A. NO. 6855 /MUM/201 6 ( / ASSESSMENT YEAR S : 20 09 10 ) SHRI VISHESH SHAHRA FLAT NO. 103, 1 ST FLOOR, 10 SHARDA BUILDING, A ROAD, CHURCHGATE, MUMBAI. / VS. THE INCOME TAX OFFICER, WARD 12(2)(3) MUMBAI ./ ./ PAN/GIR NO. AVGPS5624P ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI VIMAL PUNAMIYA / RESPONDENT BY : SHRI RAJEEV GUBGOTRA / DATE OF HEARING : 09 . 08 .2018 / DATE OF PRONOUNCEMENT : 31.10 .2018 / O R D E R PER SA KTIJIT DEY , J . M.: THIS IS AN APPEAL BY THE ASSESSEE AGAINST ORDER DATED 26.08.2016 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (AP PEALS) - 28, MUMBAI PERTAINING TO THE ASSESSMENT YEAR 2009 10. 2 ITA NO. 6855 /MUM/201 SHRI VISHESH SHAHRA 2. THE ISSUE IN DISPUTE ARISING FOR CONSIDERATION IN THE PRESENT APPEAL IS , WHETHER THE INCOME DERIVED FROM SALE OF SHARES IS TO BE ASSESSED UNDER THE HEAD CAPITAL GAIN AS CLAIMED BY THE ASSESSE E OR BUSINESS INCOME AS HELD BY THE DEPARTMENTAL AUTHOR IT IES. BRIEFLY THE FACTS ARE , THE ASSESSEE AN INDIVIDUAL FILED HIS RETURN OF INC OME FOR THE IMPUGNED ASSESSMENT YEAR ON 10.11.2009 DECLARING TOTAL INCOME OF ` .58,19,621/ . WHILE EXAMINING THE RETURN OF INCOME FILED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDING THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS DECLARED SHORT TERM CAPITAL GAI N OF ` .4480410/ ON SALE OF SHARES. SINCE , THE SHARES WERE SOLD THROUGH RECOGNISED STOCK EXCHANGES THE ASSESSEE CLAIMED TAXBILITY OF CAPITAL GAIN AT A LOWER RATE AS PER SECTION 111 A OF THE ACT . TO VERIFY THE CLAIM OF THE ASSESSEE , THE ASSESS ING OFFICER CALLED FOR VARIOUS DETAILS WITH REGARD TO PURCHASE AND SALE OF SHARES AND ALSO CALLED UPON THE ASSESSEE TO EXPLAIN WHY THE INCOME FROM SALE OF SHARES SHOULD NOT BE ASSESSED AS BUSINESS INCOME. IN RESPONSE TO THE QUERY RAISED BY THE ASSESSING O FFICER THE ASSESSE E FILED THE DETAILS AND ALSO EXPLAINED THE REASON WHY THE INCOME DERIVED FROM SALE OF SHARES IS TO BE ASSESSED AS CAPITAL GAIN. HOWEVER , THE ASSESSING OFFICER DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE AND HELD THAT THE INCOME OF ` .44,80,4 10 ARISING OUT OF SALE OF SHARES IS TAXABLE AS BUSINESS INCOME. BEING AGGRIEVED WITH T H E AFORESAID DECISION OF THE ASSESSING OFFICER ASSESSEE PREFERRED APPEAL BEFORE COMMISSIONER (A PPEALS ) . HOWEVER, HE MET WITH NO SUCCESS. 3. THE LEARN ED A UTHORISED R EPRESENTATIVE REITERATING THE STAND TAKEN BEFORE THE DEPARTMENTAL AUTHORITIES SUBMITTED , THE ASSESSE E HAS SHOWN THE SHARES AS INV ESTMENT IN 3 ITA NO. 6855 /MUM/201 SHRI VISHESH SHAHRA THE BOOKS OF ACCOUNT AND NOT AS STOCK IN TRADE . THEREFORE, THE INCOME DERIVED FROM SALE OF SHARES IS TO BE ASSESSED UNDER THE HEAD CAPITAL GAIN. HE SUBMITTED , THE ASSESSEE HAS NOT UTILIZE D ANY INTEREST BEARING BORROWED FUNDS FOR INVESTMENT IN SHARES. HE SUBMITTED , FREQUENCY AND VOLUME OF SHARE TRANSACTION CANNOT BE A FACTOR TO DECIDE WHETHER THE INCOME DERIVED FROM SHARES IS TO BE TAX ED AS BUSINESS INCOME OR CAPITAL GAIN . I N THIS REGARD HE SUBMITTED THAT ONLY BECAUSE THE AVERAGE PERIOD OF HOLDING OF SHARES IS BETWEEN 30 TO 45 DAYS THE ASSESSEE CANNOT BE TREATED AS TRADER. HE SUBMITTED , THE ASSESSING OF FICER COMPLETELY IGNORED THE FACT THAT IN THE RELEVANT PREVIOUS YEAR ASSESSEE HAS EARNED DIVIDEND INCOME OF ` .18.91.258/ WHICH CLEARLY DEMONSTRATE S THE INTE NTION OF THE ASSESSEE TO HOLD TH E SHARES AS INVESTMENT. THE LEARNED AUTHORISED REPRESENTATIVE SUBM ITTED , FROM THE PRECEDING YEARS ASSESSEE HAD BEEN SHOWING THE SHARES AS INVESTMENT AND OFFERING THE INCOME DERIVED FROM SHARE TRANSACTION UNDER THE HEAD CAPITAL GAIN AND THE DEPARTMENT HAS ALSO ACCEPTED THE CLAIM OF THE ASSESSEE . HE SUBMITTED , EVEN IN THE IMPUGNED ASSESSMENT YEAR THE LONG TERM CAPITAL GAIN OFFERED BY THE ASSESSEE HAS BEEN ACCEPTED BY THE ASSESSING OFFICER. HE SUBMITTED , ASSESSEE IS MAINTAINING A SINGLE PORTFOLIO I.E INVESTMENT PORTFOLIO FROM THE VERY BEGINNING AND OFFERING INCOME DERIVED FROM SHARE TRANSACTIONS AS CAPITAL GAIN . 4. THE LEARNED D EPARTMENTAL R EPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE ASSESSING OFFICER AND COMMISSIONER (A PPEALS ). 5. WE HAVE CONSIDERED RIVAL SUBMISSION S AND PERUSED THE RECORD. FROM THE FAC TUAL MATRIX OF THE CASE IT IS NOTED THAT FROM THE VERY INCEPTION TH E ASSESSE E HAD BEEN 4 ITA NO. 6855 /MUM/201 SHRI VISHESH SHAHRA SHOWING THE SHARE TRANSACTION AS INVESTMENT A CTIVITY IN ITS BOOKS OF ACCOUNT . IN FACT , ASSESS MENT ORDER PASSED UNDER SECTION 143(3) OF THE ACT FOR THE A.Y.2004 05 CLEAR LY REVEAL S THAT THE ASSESSING OFFICER HAS ACCEPTED THE INCOME DERIVED FROM SALE OF SHARES AS SHORT TERM CAPITAL GAIN. EVEN , IN THE SUBSEQUENT YEARS ALSO THERE IS NO DISPUTE WITH REG ARD TO ASSESSEES CLAIM. NOTAB LY , IN THE IMPUGNED ASSESSMENT YEAR THE ASS E SSING OFFICER HAS ALSO ACCEPTED LONG TERM CAPITAL GAIN OFFERED BY THE ASSE SSE E FROM SALE OF SHARE. THE PRIMARY REASON FOR WHICH THE ASSESSING OFFICER HAS REJECTED ASSESEES CLAIM OF SHORT TERM CAPITAL GAIN IS, THE SHARES WE RE HELD FOR A PERIOD OF 30 TO 45 DAYS. IN OUR VIEW , THAT CANNOT BE A DETERMINATIVE FACTOR FOR TREATING THE SHARE TRANSACTION AS TRADING ACTIVITY . FROM THE DETAILS FURNISHED BEFORE US WE FIND THAT ONLY IN RESPECT OF ONE SHARE TRANSACTION THE PERIOD OF HOLDING WAS 8 DAYS . O THERWISE , IN R ESPECT OF ALL OTHER SHARE TRANSACTION S THE PERIOD OF HOLDING VARIED BETWEEN ONE MONTH TO 11 MONTHS. IT IS ALSO NOT DISPUTED THAT THE ASSESSEE HAS NOT UTITLISED ANY BORROWED FUND FOR INVESTMENT IN SHARES . MOREOVER , THE ASSESSEE IS MAINTAINING ONLY ONE PORT FOLIO AND ONE BANK ACCOUNT TO CARRY OUT SHARE TRANSACTIONS . IN THESE CIRCUMSTANCES ONLY FOR THE PURPOSE OF BRIN G ING THE INCOM E DERIVED FROM SHARE TRANSACTION TO TAX AT A HIGHER RATE , THE ASSESSING OFFICER CANNOT TREAT IT AS BUSINESS INCOME. EVEN THOUGH PR INCIPLE S OF RE S JUDICATA DO NOT APPL Y TO TAX PROCEEDING , HOWEVER , RULE OF CONSISTENCY CANNOT ALSO BE IGNORE D . CONSIDERING THE PAST TREATMENT GIVEN BY THE DEPARTMENT TO THE INCOME DERIVED FROM THE SHARE TRANSACTION , THE INCOME OFFERED BY THE ASSESSEE FROM SHARE TRANSACTION IN THE IMPUGNED ASSE SSMEN T YEAR HAS T O BE ASSES S ED UNDER THE HEAD CAPITAL 5 ITA NO. 6855 /MUM/201 SHRI VISHESH SHAHRA GAIN. ACCORDINGLY , WE SET ASIDE THE IMPUGNED ORDER OF LEARNED COMMISSIONER (A PPEALS ) AND DIRECT THE ASSESSING OFFICER TO ASSESS THE INCOME DERIVED FROM SALE OF SHA RE S AS SHORT TERM CAPITAL GAIN . 1 6 . IN THE RESULT, ASSESSEES APPEAL IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 31.10.2018 SD/ SD/ ( MANOJ KUMAR AGGARWAL ) (S A KTIJIT DEY ) / A CCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 31.10.2018 MP / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPO NDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDE R, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI